Key points of investment
Introduction: In 2023, Tourover was listed as “the first stock in the independent automotive after-sales service market” and achieved full-year profits for the first time, and the business model was verified. As the average age of domestic vehicles reaches an inflection point, the car service market will enter a new stage of development, and the business model and competitive pattern of leading players may embark on a unique path from overseas. This article attempts to answer: 1) characteristics and space of domestic demand; 2) IAM has good prospects, where are the advantages of the O2O model; 3) there are many losers in the O2O model. What did Tourover do right, and how do you view its future expansion and profit margins.
Demand for car services has reached an inflection point, looking at $2 trillion in 2027. China's trillion-dollar auto service market is still growing. Insight Consulting expects to reach 1931.9 billion yuan in 2027, with a CAGR of 9% from 2023 to 2027. 1) Car ownership: It is expected to benefit from the increase in per capita income. In particular, there is still room for growth in the sinking market. If we compare Japan, we expect 319 million cars to be owned in 2027, with a CAGR of 4.2% in 23-27. 2) Average vehicle consumption: The average domestic vehicle age reached the inflection point of maintenance, and the increase in per capita income+increase in vehicle age led to growth. Insight Consulting expects the average annual service expenditure per vehicle to rise to 5,168 yuan in 2027, with a CAGR of 2.7% in 23-27. 3) Compared with traditional cars, the replacement cycle for new energy vehicles is shorter. The total service expenditure and structure of each vehicle have changed, but the short-term impact on the market is limited, and the long-term focus is on structural opportunities.
Supply changes: The Internet model drives value redistribution. 1) The old pattern: The market is highly fragmented (leading revenue share is 2%, CR5 is less than 6%). 4S stores account for 54% GMV share with 4% of the number of stores, but they are not the most efficient. Spare parts prices and service fees are 30% and 80% higher than IAM stores, respectively. 2) New changes: As more car warranty periods expire and the age of cars increases, consumer demand for IAM (independent after-sales) is expected to increase. Insight Consulting expects IAM GMV to grow to 1.1 trillion yuan in 2027, increasing its market share to 58%. The IAM chain rate is insufficient (only 4.8% of IAM stores are chain stores, CR5 has a market share of 3%). Mainly due to the characteristics of the automotive industry, it is difficult to widely establish a product scale effect, and the requirement for service quality makes it more difficult to integrate the industrial chain. We are more optimistic about having the advantage of aggregating demand and at the same time being an O2O platform integrating the entire industry chain to seize market share. (If not specified, all data are from 2022)
Tourover Car Maintenance: A model for effective expansion, beginning a profit release period. Auto service O2O is essentially a slow business, and the platform needs to achieve effective expansion: most stores can continue to be profitable; the repurchase rate and ARPU are more important than MPU; and the revenue share of long-term high-margin product/service categories can increase. Tourover is an example of effective expansion. 1) While the number of stores is ahead of peers, franchisee profits are superior to the industry average, and profits are sustainable: Tourover standardizes services through full-process digital transformation and instant fulfillment systems, improving user experience, deepening user trust, and increasing repurchase rates. The repurchase rate of Tourover users, revenue contributions from returning customers, and direct store order revenue contributions showed a steady upward trend. In terms of regional expansion, Tourover has a deep understanding of the offline chain business format. Density > speed. The average number of factory stores in all first-tier cities and new first-tier cities exceeds 100, achieving an average of one Tourover factory store per 3 km in Shanghai, Shenzhen, Dongguan, etc. Higher urban density helps companies establish a regional flywheel effect, thereby continuing to seize market share. The subsequent focus is on sinking the market. We have a neutral view of 10,000 stores, and there is still room for 81% growth compared to 2023. 2) Profit direction: The company turned a loss into a profit for the first time in 23 years, with a gross profit margin of 25%. If there is still a lot of room for improvement compared to the US IAM leader (TOP4 average of 46%), we are optimistic about three aspects that will drive the company's gross margin to continue to rise:
Scale effect; increase in revenue share of high gross margin SKU; increase in revenue share for exclusive and private brands.
Internet giants have increased or accelerated the clearance of the industry in the short term, but the impact on Tourover's share and profits is limited.
Profit prediction and investment rating: We are optimistic that the advantages of the corporate model will be further highlighted, and that profitability will be further improved while the terminal network is expanding. We expect the company's adjusted net profit for 24-26 to reach 736/12.28/1,777 million yuan, respectively. Referring to the valuation of leading companies in the US auto service market, the company was given 20 times PE in 2025, corresponding to a target price of 33HKD, which covered the “buy” rating for the first time.
Risk warning: competition intensifies, short-term demand falls short of expectations, and demand for NEV services falls short of expectations